Monday, September 29, 2008

I admit a
certain bewilderment at the market's behaviour today: I never expected
the post-bailout orgasm to last, but it's hard to believe that it only
lasted 25 minutes of the Australian session.

After all, the Tycoon's Whores of the US Congress are a lay
down misère to
pass Wall Street's biggest-ever tax-funded payday. I seriously doubt
that the market reaction we've seen thus far represents a manifestation
of the old 'Buy the rumour, sell the news' mantra - after all, the
market is now dominated by people who are dumber than a bag of offal
(even hedge funds are now staffed almost entirely by people who behave
like small spec futures traders... late onto any trend, buying tops and
selling bottoms... that's why so many hedge funds have blown up lately).

Perhaps Strayan market participants are anticipating a Wall
Street hissy-fit since they haven't got exactly what
Goldman's Trojan Horse (Mr Hankie) demanded. Apparently the deal (at
the moment) is that they only get half
of the $700 bill up front.

The fact is, this bailout is going to cost waaaaaaaaaaaaaaaaaay
more than the $700 bill that is claimed.

As I said when the political class first started with the
claim that the cost of the subprime meltdown would be "between $50bn
and $100 bn"... the $700 claimed bailout price tag is
bullshit.

I said at the time (look in the archive) that the cost of the
subprime mess would be at
least a trillion and a half. At the moment (ignoring
Fannie and Freddie, Lehman, AIG and Merrill) the total writeoffs have
run to about $650 bill... so we are almost halfway there. If you
include Fannie and Freddie, the total cost balloons to about $5
trillion, because its assets are now worthless.

This latest bailout will, when all is said and done, cost
about half of one years US GDP. that is, about $6 trillion. And it's
not important whether you believe me or not, because you just know I am going to
yell "I told you so" when it turns out that I'm right.

So thus far, the US whiz kids have generated a transfer of
problems from the market to the government, totalling - eventually - a
year's worth of US GDP. That signals the beginning of a process that
can only end in a US default on its sovereign debt.

The US dollar is already losing its reserve status - slowly,
but surely - and once that is gone the end game will be stunningly
quick. The one
thing that stands in the way of a more rapid unraveling, is the
gutlessness of Moody's and S&P when it comes to
rating US government debt: they are too chicken to declare
openly that the US can
never make good on its debt.

Think of the US as a company. It has 'revenue' (the taxes
extorted from taxpayers) of a couple of trillion dollars. It
has a negative operating cash flow - even on a cash basis - so
think of that as negative EBITDA.

Once you add in accruals for the promises it has already made
(pensions, and so on) its annual loss is four or five trillion
dollars.

And it has recently acquired a dog of an asset - the loan book
of Fannie and Freddie - and is about to write a cheque which in the
fullness of time will amount to twice its annual revenue.

If you were a credit analyst and you had such a company in
front of you, it would rate C- (at best)... junk, and bad junk at
that.

And it wouldn't matter how many cruise missiles or battleships
or trained killers it had, the thing would be obvious as a candidate
for disappearing from the pages of history (as the Ayatollah Khomeini
once said of Israel, and which was repeated by Mahmoud Amedinejad,
deliberately mistranslated by MEMRI and flogged as evidence of the
Iranian's malevolent intent).

Major Market Indices

The broad market - the All Ordinaries (XAO)
- dipped reasonably hard, registering a loss of 95.4 points (1.93%),
finishing at 4839.2 points. The index hit an intraday high of 4980.2 at
10:24 am, while the low for the day was 4818.5 - set at 3:03 pm Sydney
time.

Total volume traded on the ASX was 946.6m units, 41.6% below
its 10-day average. The ASX's daily listing of all stocks included 1230
different 3-letter FPO's which traded (i.e., had non-zero trade
volume). Of these, 334 issues rose, with volume in rising issues
totalling 299.1m units; decliners numbered 611 counters, and between
them they traded aggregate declining volume of 511.8m shares.

Of the 496 All Ordinaries components, 114 rose while 284 fell.
Volume was tilted in favour of the losers by a margin of 1.9:1, with
213.69m shares traded in gainers while 409.34m shares traded in the
day's losers.

The Index that forms the cash basis for the SFE's Share Price
Index Futures - the S&P/ASX 200 (XJO)
- registered a loss of 97.4 points (1.99%), closing out the session at
4807.4 points.

The "heavy hitters" of the Australian market - the ASX
20 Leaders (XTL)
- was taken to the woodshed somewhat, sliding 57.3 points (2.03%),
closing out the session at 2765.8 points.

The 21 stocks which make up the index traded a total of 85.73m
units; 5 index components rose, with rising volume amounting to 29.04m
shares, while the 14 decliners had volume traded totalling 50.97m
units. The major percentage gainers within the index were

At the other end of the market-cap spectrum lie the denizens
of the ASX Small Ordinaries (XSO)
which , while still dropping overall, did significantly better than its
large-cap counterpart. The Small Ords registered a loss of 35.1 points
(1.35%), closing out the session at 2573.6 points.

Among the stocks that make up the Small Caps index, 50 index
components finished to the upside, and 126 closed lower
for the session. The 208 stocks which make up the index traded a total
of 305.07m units:
volume in the 50 gainers totalling 142.02m shares, with trade totalling
130.18m units in the index's 126 declining components. The major
percentage gainers within the index were

Centro Properties Group (CNP),
+$0.02 (23.53%) to $0.11 on volume of 66.4 million shares;

Rubicon Europe Trust Group (REU),
+$0.00 (16.67%) to $0.02 on volume of 6.4 million shares;

Centro Retail (CER),
+$0.02 (11.54%) to $0.15 on volume of 11.5 million shares;

Market Breadth

GICS Industry Indices

Among the 11 industry indices, 3 registered an advance for the
session, the remaining 8 lost ground.

The best performing index was Information Technology
(XIJ),
which added 13.7 points (2.67%) to 527.2 points, which has only two
components. Today they traded a total of 2.12m units; the lone rising
index
component had volume amounting to 1.51m shares, while sole declining
stock traded 0.61m units. The gainer was Computershare
(CPU),
+$0.28 (3.11%) to $9.29 on volume of 1.5 million shares.

Second in the index leadership stakes was Telecommunications
(XTJ),
which gained 5.6 points (0.39%) to 1427.2 points. This index only has
three stocks and today they traded a total of 22.33m units. Two index
components
rose, with rising volume amounting to 20.34m shares, while sole
declining stock traded 2m units. The gainers were

Telstra Corporation (TLS),
+$0.02 (0.48%) to $4.22 on volume of 19.6 million shares.

The bronze medal for today goes to Healthcare
(XHJ),
which climbed 10.1 points (0.11%) to 9266.8 points. The 9 stocks which
make up the index traded a total of 8.67m units; 3 index components
rose, with rising volume amounting to 1.46m shares, while the 6
decliners had volume traded totalling 7.22m units. The major percentage
gainers within the index were

The worst-performed index for the session was Materials
(XMJ),
which dipped 505.1 points (4.15%) to 11652.5 points. The 45 stocks
which make up the index traded a total of 116.48m units; The 31
decliners had volume traded totalling 99.04m units, and 9 index
components rose, with rising volume amounting to 9.24m shares, The
major percentage decliners within the index were

Straits Resources (SRL),
-$0.29 (9.7%) to $2.70 on volume of 2.2 million shares;

Onesteel (OST),
-$0.4 (7.52%) to $4.92 on volume of 4.1 million shares;

Murchison Metals Ltd (MMX),
-$0.11 (7.01%) to $1.46 on volume of 1.4 million shares; and

Fortescue Metals Group Ltd (FMG),
-$0.38 (6.35%) to $5.60 on volume of 5.6 million shares.

Just missing out on the wooden spoon was Utilities
(XUJ),
which slid 83.9 points (1.78%) to 4619.5 points. The 10 stocks which
make up the index traded a total of 31.57m units; The 5 decliners had
volume traded totalling 18.1m units, and 4 index components rose, with
rising volume amounting to 5.36m shares, The major percentage decliners
within the index were

Babcock & Brown Infrastructure Group
(BBI),
-$0.02 (4.23%) to $0.34 on volume of 12.3 million shares;

Third-to-last amongst the sector indices was Industrials
(XNJ),
which slid 81.8 points (1.77%) to 4533.9 points. The 32 stocks which
make up the index traded a total of 74.43m units; The 21 decliners had
volume traded totalling 63.97m units, and 6 index components rose, with
rising volume amounting to 6.13m shares, The major percentage decliners
within the index were

Boart Longyear (BLY),
-$0.11 (8.11%) to $1.19 on volume of 17.1 million shares;

United Group (UGL),
-$0.86 (6.34%) to $12.71 on volume of 544 thousand shares;